At the end of November on our premium site we did an analysis on the Dow Transports (you can view it here). Classic Dow theory states that when the Dow hits new highs, but the Transports fail to join them, it is a worrisome sign.
Since then, several Truckers have warned that their quarters will be considerable worse than expected, due to "sluggish freight demand." Black & Decker (BDK)? They slashed earnings to $1.30 to $1.35 in Q4, an average forecast $1.85 a share (but there is no slow down). Home Depot (NYSE:HD)? Lowes (NYSE:LOW)? Best Buy (NYSE:BBY)? All company specific.
Deutsche Bank analyst Jordan Alliger noted the disconnect between strong retail numbers, the soft landing scenario, and the realityon the ground from the Transports:
Peak season volume trends continue to track below what we think is required to boost productivity enough to meet our fourth-quarter earnings-per-share forecasts . . . Should the peak season volume malaise extend deeper into 2007 and call into question the so-called 'soft-landing' economic scenario, we could yet prove far too conservative with our newly revised down forecasts.
If your reality is determined by what is going on in the markets, than this is all irrelevant. As we noted earlier this morning, none of this real world stuff matters a whit.
As a commenters noted earlier today, the market is saying all is well. There is a new reality show in town, and its called the "Four 20-inch monitors." I guess I better start getting used to it.